Markets Surge as U.S. and China Strike Major Trade Deal

U.S.-China trade deal boosts global markets, slashes tariffs, lifts dollar, and impacts key currencies and commodities.

Financial markets roared to life on Monday following a surprise trade deal between the United States and China, marking a breakthrough in bilateral relations and a significant de-escalation in global trade tensions. Investors welcomed the sharp reversal in tariff policies, with major indices rallying and the U.S. dollar surging to multi-week highs.

Under the terms of the 90-day agreement, Washington will reduce its punitive tariff rate on Chinese imports from 145% to 30%, while Beijing will lower its retaliatory duties from 125% to 10%. Additionally, China has agreed to roll back non-tariff barriers, including export controls on rare earth minerals—a move seen as a gesture of goodwill to global markets.

Markets Surge as U.S. and China Strike Major Trade Deal

U.S. equities closed sharply higher, with the S&P 500 jumping 2.8% and the Dow Jones Industrial Average posting its best single-day gain since January. In currency markets, the dollar index (DXY) climbed more than 1% to break above 101.50, its strongest showing in over a month. Demand for the greenback was supported by reduced geopolitical uncertainty and anticipation of key inflation data due Tuesday.

Meanwhile, gold prices took a significant hit as investor demand for safe-haven assets waned. Spot gold plunged nearly 3%, approaching $3,200 per ounce, marking its steepest one-day decline in weeks.

Asia Braces for Follow-Through

The positive sentiment is expected to spill over into Asian markets, which open later tonight. Australia’s economic docket will be in focus with the release of the Westpac Consumer Sentiment and NAB Business Confidence surveys. Although both indicators have weakened in recent months, the trade breakthrough could boost sentiment moving forward.

The Australian dollar (AUD) remains under pressure in the short term due to weak domestic data, but expectations for a recovery are rising. Meanwhile, the Reserve Bank of Australia has indicated that monetary policy remains restrictive, though inflation continues to moderate.

DXY Awaits Inflation Test

The next big test for the U.S. dollar comes at 12:30 pm GMT with the release of the April Consumer Price Index (CPI). Both headline and core inflation are forecast to remain steady. A stronger-than-expected print, however, could provide a fresh catalyst for dollar strength, reinforcing the market’s recent bullish tilt.

Commodities & Currencies Outlook

Gold (XAU): Prices remain near $3,200/oz, following Monday’s steep drop. With the Fed expected to stay cautious amid persistent inflation risks, gold may find support in the medium term, but near-term bias is weakly bearish.

AUD/USD: The Aussie dollar will be driven by domestic survey results and broader risk appetite. Given the improved global outlook, future sentiment data may show recovery, but the next 24 hours are expected to remain under modest bearish pressure.

NZD/USD: The Kiwi dollar hovers above 0.5850 after Monday’s sharp decline. With no key domestic releases, movement will likely mirror global risk sentiment and U.S. inflation data. Bias: weak bearish.

USD/JPY: The yen weakened as demand for safe-haven assets evaporated, with USD/JPY pushing past 148.50 before consolidating. A hot CPI reading could extend the dollar’s advance. Bias: weak bullish.

EUR/USD: After plunging nearly 1.5%, the euro could rebound on improved ZEW sentiment data expected out of Germany and the eurozone today. However, the overall direction hinges on the U.S. CPI result. Bias: weak bearish.

USD/CHF: The franc slumped in line with other safe havens. Despite a minor correction during Asia hours, USD/CHF remains supported near 0.8500. Bias: weak bullish.

GBP/USD: The pound faces pressure ahead of today’s U.K. labour force report and a speech by BoE Governor Bailey. Softer data could reinforce the case for continued monetary easing. Bias: weak bearish.

USD/CAD: The pair climbed above 1.4000 as dollar strength dominates. No major Canadian releases are due, leaving direction reliant on U.S. CPI and crude oil dynamics. Bias: weak bullish.

Central Bank Highlights

• Federal Reserve: Maintained rates at 4.25–4.50% in May, with inflation still “somewhat elevated.” Projections for 2025 GDP growth were revised downward, while core inflation is now expected to reach 2.5%.
• RBA, BoE, SNB, ECB, BoJ, BOC: All maintain a cautious stance amid global uncertainty, with several having initiated rate cuts to support domestic growth.

With inflation data set to dominate market sentiment today, investors are bracing for potential volatility across asset classes. While the U.S.-China trade truce has provided a much-needed boost to risk appetite, inflationary pressures and central bank policy direction remain in sharp focus.

Next 24-Hour Market Bias:

• DXY: Weak Bullish
• Gold: Weak Bearish
• AUD, NZD, GBP, EUR, CHF: Weak Bearish
• JPY, CAD: Weak Bullish

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